Global Inequality Widening as One Billion Still Live in Extreme Poverty

A displaced child stands outside the family's temporary dwelling after fleeing famine in the Marka Lower Shebbele regions to the capital Mogadishu, September 20, 2014Reuters

The number of people living in extreme poverty is falling, but the gap between the world's richest and poorest is widening.

While more than one billion – or 14% of the world's population – live below the poverty line of $1.25 per day, that figure is down from 1.2 billion – or 19% of the world, in 2008.

Inequality, on the other hand has reached "levels unprecedented since World War II", with the world's richest 10% now earning 9.5 times more than the poorest 10%, up from the sevenfold figure 25 years ago.

These are the two main takeaways from the World Bank and International Monetary Fund's Global Monitoring Report, which tracks developmental institutions' efforts to virtually eradicate poverty and close the gap in living standards by 2030.

The World Bank is confident of meeting its interim target of reducing extreme poverty to single digits by 2020 "however, even if extreme poverty continues to fall as projected in East and South Asia, the prospects of reducing global poverty to below 3% by 2030 are not good".

Furthermore, the bank finds that the prospects of boosting shared prosperity are "more complex". People in the bottom 40% of the developing world are much worse off in terms of education, healthcare and sanitation with children there "almost twice as likely to be malnourished than those in the top 60%".

The report comes with criticism from within the World Bank itself. Chief Economist Kaushik Basu said it is "shocking to have a poverty line as low as $1.25 per day" – despite the fact that the line is set by the World Bank itself.

He continued: "The levels of inequality and poverty that prevail in the world today are totally unacceptable. This year's Global Monitoring Report, which brings together in one volume a statistical picture of where the world stands in terms of these goals, is essential fodder for anyone wishing to take on these major challenges of our time."

President Jim Yong Kim weighed in with some praise at the progress made, but also admitted that inequality "stubbornly persists all over the world".

The institutions' proposed solution is economic growth, the engine around which they have built their global economic policy since the 1940s.

The report "reaffirms the centrality of economic growth, and the importance of inclusive and sustainable growth, for achieving the twin goals of ending poverty and improving the living standards of the bottom 40% in every country – developed and developing".

This, however, will be anathema to the growing body of groups which are attempting to steer the global development charter away from its erstwhile exclusive focus on output.

In a conversation with this journalist a few years ago, the Green Party MEP and economist said; "If you're involved in economic management, then you do need to know the size of what you're dealing with. But measuring that in a way that relates to money is not very helpful.

"The fact that we rely on GDP is symbolic of something much deeper that's wrong with the way we think about an economy. We've detached importance from stuff that has real value and replaced it on stuff that only has financial value."

For their part, the report's authors are sanguine about global growth prospects and hope that the "encouraging" outlook will help breed sustainable development too.

Sean Nolan, IMF deputy director for Strategy, Policy and Review, said: "Despite the weakness in the global economy in 2014, we still project growth for low-income developing economies to be over 6 percent over the medium term, which bodes well for the world's poor.

"We are generally optimistic about the growth prospects of the three regions with almost 95% of world's poor in 2011 – East Asia, South Asia, and Sub-Saharan Africa, but need to keep in mind that there are many individual countries within these regions where growth prospects are less benign."